TWO Researching the Venture

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TWOResearching the Venture

• Ian Harris
• Entrepreneurial Champion

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Objectives

• Idea Creation
• Finding the idea
• Developing your creativity
• Market Research the 40,000 foot view
• Market Research the 10 foot view
• Competitor Analysis Matrix
• SWOT and USP
• Feasibility Study

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Why Research

• Its important to research an entrepreneurial
  ventures feasibility. Doing this entails
  generating and evaluating business ideas,
  researching and evaluation competitors, and
  exploring and evaluating the various financing
  options.
• There are four main sources of ideas.
• First is personal interests or hobbies. Many
  entrepreneurial ventures got their start because
  of an entrepreneurs love of doing something.
• Another popular source is an entrepreneurs work
  experiences, skills, and abilities.
• The third source is to look at products and
  services currently available, both familiar and
  unfamiliar ones.
• Finally, opportunities in the external
  environment can be a source of potential
  entrepreneurial ideas

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Looking for the right idea

• It is highly unlikely to come to you in a flash
  of divine inspiration
• Draw up a short list of ideas
• Initially Rank those ideas
• Identify product/service value proposition
• Well see how to do this later
• Do you need to partner with one or more others..?
• You might not be big enough to go it alone
• Is your idea a licence opportunity, a franchise
  opportunity
• How big do you want your business to be
• Your idea has to scale with your vision

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Ideas

• What types of things should entrepreneurs look
  for as they explore ideas?
• Look for the limitations of what is currently
  available
• If you use a product or service, critically
  evaluate what it does well and what it does badly
• Welsh Spelling Checkers
• For new and different approaches
• Look at how products and services do what they do
• Dyson vacuum cleaners
• Look at scientific and technological advances and
  breakthroughs
• Lots of very useful ideas are placed in the
  public domain without protection
• For unfilled niches
• As new products and services emerge, new niches
  can be exploited
• Hot Tub - chemicals
• And at trends and changes
• Whats growing, whats fashionable
• Scooter sales Christmas 2000

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Problem/Opportunity Definition

• Problem Definition
• Idea Generation
• Idea Evaluation
• Idea Judgement
• Solution Implementation
• This is an iterative process

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The Chocolate Candy Problem

• You have bought a big box of chocolates. The
  chocolates are shaped like small bottles and
  filled with thick raspberry syrup. But how did
  they get the raspberry syrup in there
• How could you solve this problem..?

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Environmental Scanning

• Environmental scanning is the screening of large
  amounts of information to detect emerging
  trends. It can stimulate ideas by looking at
  upcoming trends from the data you reviewed. By
  approaching an idea in this way, youll know that
  the forecast trend is in your favor.
• Theres lots of physical and electronic data out
  there and you need to assemble, codify and
  analyze it
• CC1 - So you could try to find out how its done

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Creativity

• Creativity and creative problem solving is a
  structured technique for generating ideas.
• Some specific techniques for enhancing creativity
  are
• free association where the entrepreneur develops
  a new idea through a chain of word associations
• attribute listing in which the entrepreneur
  develops a new idea by looking at the positive
  and negative attributes of existing
  products/services.
• Cc2 you could be creative

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Brainstorming

• In a typical brainstorming session, a group of
  people sit around a table. A group leader states
  the issue to be addressed. Then members
  free-wheel as many ideas as they can in a given
  time.
• Participants are encouraged to come up with as
  many ideas as possible and to build on each
  others ideas. No criticism of ideas is allowed.
  Instead, all ideas, no matter how crazy, are
  recorded for later discussion and analysis.
• It can be a frenzied, yet productive way to
  generate numerous ideas.
• Cc3 you could free-form your ideas with a group

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Focus Groups/Intuition

• With a moderator a focus group discusses specific
  ideas its a feedback loop as well as the
  initiation of new ideas
• Intuition
• Dont underestimate this one, but make sure you
  qualify it too
• Cc4 you could guess and use your intuition

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Chocolate Candy Problem

• Freeze the syrup and dip in hot chocolate
• Inject syrup into hollow chocolate bottle and
  plug with more chocolate
• But which would be most efficient

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Now try this

• Divide the triangle into four identical pieces

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Easy
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Problem solving
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Idea Generation - Summary
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Idea Evaluation
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Market Research

• The purpose of market research is to provide
  relevant data that will help solve the marketing
  problems a business will encounter. This is
  absolutely necessary in the start-up phase.
• You'll be gathering two types of data. The first
  will be "primary" information that you will
  compile yourself or hire someone to gather.
• Most information, however, will be "secondary,"
  or already compiled and organized for you.
  Reports and studies done by government agencies,
  trade associations, or other businesses within
  your industry are examples of the latter.

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Marketplace considerations the 40,000 foot view

• Who are the potential customers for your idea
• What similar or unique product features does your
  proposed idea have in relation to whats
  currently on the market..?
• How and where will potential customers purchase
  your product..?
• Have you considered how you will price your
  proposed idea. Have you calculated your
  break-even point..?
• Have you considered how you will need to promote
  and advertise your venture..?

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How would you do this..?
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What in essence you need to do

• define your position in the market place
• define your product or service
• identify your potential customers, their needs
  and expectations
• determine the price your customers will be
  prepared to pay
• identify the level of quality and service your
  customers require
• describe your competitors, what they offer and
  their strengths and weaknesses
• describe how best to communicate your message to
  your prospective customers
• decide where your advertising campaign should be
  conducted and estimate your potential market
  share.

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Market forces

• Rivalry among existing businesses competing to
  supply the same product or service
• The threat of new entrants in the marketplace and
  the impact they may have If the barriers to
  entry are high there is much less of a threat to
  existing players than if it is fairly easy for a
  new firm to join in the fun. Conversely, as a new
  entrant you will be happier if there are few
  factors that pose a major block to entering your
  chosen market.
• The threat of substitute products or services,
  including those which, though different to yours,
  might provide similar benefits Customers may
  have the choice not only of buying your
  particular type of products or services - from
  you or your direct competitors - but also of
  choosing a substitute method of solving the
  problem.
• For example, suppliers of manual accounting
  packages are not only competing against each
  other, they also face the possibility of
  customers deciding to use computerised systems.

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Market forces

• The bargaining power of suppliers and, in
  particular, their effect on costs
• If the supplier of a particular product or
  service has little competition or is a monopoly,
  you may find it difficult to negotiate
  arrangements which are cost effective. You may
  then need to look for substitutes.
• The bargaining power of customers, and in
  particular, their effect on prices
• Without customers there is no market. They
  usually have notable buying power simply because
  they are in a position to choose from whom they
  buy although this is not necessarily always the
  case. You may be fortunate in being the sole
  supplier of a particular type of product or
  service aimed at a particular target group -
  often called niche marketing - but such luxuries
  seldom last for long.

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Market Research the 10 foot view
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Primary Research

• Direct Mail
• Phone Surveys
• Personal Interviews
• Personal interviews
• Group discussions

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Personal Survey

• PROS
• Greater flexibility and control
• Opportunity to clarify if misunderstandings arise
• Can ask supplementary questions
• High response rate
• Can watch body language as well as verbal
  responses
• CONS
• Time consuming
• Expensive
• Respondents have little time to think

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Telephone Survey

• PROS
• More flexibility and higher response than post
• Reach people who wont give personal interview
• Fast
• Convenient when calls are far apart
• CONS
• Interviews must be short
• Respondents have little time to think
• May give inaccurate response
• Costly
• Only reach people with telephones
• Lack of personal rapport

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Postal Survey

• PROS
• Respondents have time to think
• May express true feelings and be more objective
• Useful when respondents are difficult to contact
• CONS
• Notoriously low response
• No flexibility to clarify answers
• Limited information produced
• Response may not represent sample mailed
• Time consuming
• Expensive

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Primary Research

• Direct Mail
• Most of the costs here concern the printing of
  questionnaires, envelopes, postage, the cover
  letter, time taken in the analysis and
  presentation, the cost of researcher time, and
  any incentives used.
• Phone Surveys
• The main costs here are the interviewer's fee,
  phone charges, preparation of the questionnaire,
  cost of researcher time, and the analysis and
  presentation of the results of the questioning.
• Personal Interviews
• Personal interviews. Costs include the printing
  of questionnaires and prompt cards if needed, the
  incentives used, the interviewer's fee and
  expenses, cost of researcher time, and analysis
  and presentation.
• Group discussions. Your main costs here are the
  interviewer's fees and expenses in recruiting and
  assembling the groups, renting the conference
  room or other facility, researcher time, any
  incentives used, analysis and presentation, and
  the cost of recording media such as tapes, if any
  are used.

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How do I ask the question?

• What do you want to know?
• Build a question around it for example, where
  will I advertise?
• Q. When youre looking for a plumber do you look
  in
• Yellow Pages?
• regional newspaper?
• free paper?

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Some Dos and Donts

• DOs
• Do define the target audience, e.g. it is not
  possible to check the 16-25 year old fashion
  market by surveying pensioners!
• Do keep the wording as SIMPLE as possible, eg do
  not ask passers-by about advertising copy.
• Do be PRECISE, eg not Do you watch TV
  regularly? but Do you watch TV every day?.
• Do put EASY and INTERESTING questions first.
• Do have a LOGICAL order.
• Do keep CONFIDENTIAL or PERSONAL matters and
  COMPLEX questions towards the end.
• Do try to make the FIRST question fix the factor
  under review - Do you own a computer?, Do you
  drink lager?.
• Do ask questions in the past tense, that way you
  are more likely to get a truthful answer.
• Do a mock analysis of your questionnaire before
  conducting your research.

• DONTs
• Dont ask questions the respondent probably
  cannot answer, eg What is your husbands
  favourite beer?.
• Keep the questions to respondents personal
  experience.
• Dont ask LEADING questions, which imply an
  answer, eg Do you think the capacity of the
  fridge is too small?.
• Dont use EMOTIVE words, eg Do you buy cheap
  brands? (Low Cost is preferable).
• Dont ask DOUBLE BARRELLED questions, eg Do you
  like the colour and design of this dress?.
• Don't touch on certain topics (or else phrase the
  question carefully), eg Tell me your exact
  income (No would be the answer). Instead, give
  a choice of income bands.
• Dont ask questions which involve loss of status
  for the respondent, eg Can you afford a car?.
• Don't ask more than three or four multiple choice
  questions. Your respondent's memory is not that
  good.

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• Ask yourself these three key questions, which
  cover the main things you will need to know.
• Customers - can I interest them in my product or
  service, can I communicate with them, and will
  they pay me enough to be profitable?
• Competitors - will I be able to compete with
  other businesses in the marketplace?
• Operations - do I have the ability and resources
  to meet the needs of my customers?

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Other ways of cheap Market Research

• Contact the appropriate industry or trade
  association. Inquire about research reports or
  survey data available to members.
• Hire an MBA team/student
• Call on a business research centre
• Business Connect
• Study a set of old and current phone books
• In the past someone might have had the same idea
  as you and its failed
• Expand your focus group effort
• Aim to interview a few hundred local hobbyists.
  Where do hobbyists hang out online? Find out what
  listserv discussion groups are available for your
  prospective customers
• Learn from your competitors

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Secondary Research

• Public. Public sources are the most economical,
  as they're usually free, and can offer a lot of
  good information.
• Commercial. Commercial sources are equally
  valuable, but usually involve costs such as
  subscription and association fees.
• Educational. Educational institutions are
  frequently overlooked as viable information
  sources

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Competitor Analysis

• What types of products or services are the
  competitors offering?
• What are the major characteristics of these
  products or services? What are their products
  strengths and weaknesses?
• How do they handle marketing, pricing, and
  distributing?
• What do they attempt to do differently from other
  competitors? Do they appear to be successful at
  it? Why? Why not?
• What are they good at? That is, what competitive
  advantage(s) do they appear to have?
• What are they not so good at? What competitive
  disadvantage(s) do they appear to have?
• How large and profitable are these competitors?
• Learn all you can about your competitors. Use
  published sources.
• Obtain their annual reports. Ask survey or focus
  group questions.
• Analyse and describe their strengths and
  weaknesses.

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Competitor Matrix
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• When analysing what you have learnt, attempt to
  identify any
• external factors which might affect you in
  implementing your
• business plans. What are the trends in the
  market? What may affect those trends (for
  example, technological changes or political
  changes or economic changes)?
• What will be the reaction of your competitors to
  a new entrant in the market place?
• Describe the opportunities and the threats.

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SWOT Analysis

• Strengths, Weaknesses, Opportunities and Threats
• S
• How are you stronger than the opposition
• W
• How are you weaker than the opposition
• O
• What opportunities has your market research
  identified
• T
• How are these opportunities threatened

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Unique Selling Points (USPs)

• This is how you differentiate yourself from the
  competition
• Its about how you value your offering
• USPs can be
• Novel, New, Innovations
• Price/Quantity/Quality
• Service Standards
• But you still need to quantify this

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Feasibility Study

• A feasibility study is a structured and
  systematic analysis of the various aspects of a
  proposed venture and is designed to clarify its
  suitability for further work
• Precursor to the Business Plan
• Likely to create several of these and iterate
  them, i.e. do them more than once

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Feasibility Study
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Other Resources

• www.aber.ac.uk/crisalis/links
• www.kompass.com
• http//www.entrepreneur.com/article/0,4621,291713,
  00.html
• https//www.shell-livewire.org/beyourownboss/regis
  ter.php?requiresLogin1referrer2Fbeyourownboss
  2Fmain.php3Fcatid3D426subcatid3D1526artid3D1
  024069361.2330